Top Challenges Facing 21st Century
Law Firms
An informative study on how you can survive the legal ‘buyers’
market and thrive among your competition
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© CTS Inc. - 2013
Researched and produced by…
Sponsored by…
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Why we commissioned a study…
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•
We understand that recovering from the
recent recession has been especially difficult
for lawyers and law firms nationwide
•
Client demands are greater than ever
•
We wanted to help find solutions to the
challenges the law industry faces
•
So we hired an independent research
company to look into these problems
•
We are pleased to share this executive
briefing with you!
© CTS Inc. - 2013
Areas covered…
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•
Unveiling the challenges law firms
are facing in today’s difficult
economy
•
How administrative challenges are
affecting liability and bottom
line profitability
•
What the major drivers are of
innovation in today’s legal industry
and how law firms can capitalize on
these opportunities
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The Law Industry Today
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More lawyers every year . . .
Number of U.S. Attorneys
1,300,000
•
Over the last 30 years the
number of lawyers has
nearly doubled – marking an
increase of 93%!!
•
Projected growth of 13% by
2018 would mean an
estimated 150,000 additional
lawyers will be joining the
workforce
1,200,000
1,100,000
1,000,000
900,000
800,000
700,000
600,000
1980
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1990
2000
2010
Sources: Labor Force, Employment, and Earnings, No. 672. Employed
Civilians, by Occupation, Sex, Race, and Hispanic Origin: 1983 and 1997, US
Census Bureau; 1990 STF-4 Occupation Groups and Their Redistribution into
the Census 2000 SF-4 Occupation Groups, US Census Bureau, 2005; NAICS
54111, Offices of Lawyers, BLS, March 2003; National Lawyer Population by
State, American Bar Association, 2010
Law firms were not immune to the recession
Revenue Growth 1997-2007
(in billions)
•
From 1997-2007 the law
industry almost doubled in
revenue
•
However, during the recent
recession, legal business
dropped nearly 11%
•
More lawyers and less
business equals a fierce
competition for clients
$2.6
$2.2
85% Growth!
$1.8
$1.4
$1.0
1997
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2002
2007
Source: BTI Premium Practices Forecast 2011, BTI Consulting, 2010
How did clients respond to the recession?
•
Clients started applying more
scrutiny to bills and demanding more
for their legal expenses
•
Even though cost continues to be a
major concern, it is no longer the
client’s top priority
•
Their top priority is the perceived
VALUE they derive from their
investment
Source: BTI Premium Practices Forecast 2011, BTI Consulting, 2010
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And… client expectations have skyrocketed
30%
70%
•
We know clients expect a great deal of
VALUE from the law firms
they engage and if they don’t get that
value – they move on
•
60% of companies report having fired
at least one law firm used by their
company during the past year
•
7 out of 10 clients do not recommend
their primary law firm
Sources: Lawyer Responsiveness: How Small and Mid-Sized Firms Can Stay Competitive in
the Face of High Client Expectations, Blackberry / Research In Motion Limited, 2006; Nearly
70% of clients dissatisfied, Law Marketing Portal, April 13, 2006
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What is driving this dissatisfaction?
Reason for Termination
57%
52%
44%
When asked why they terminated a
law firm, business executives cited the
top 3 reasons:
1.
Cost overruns – lack of perceived
value for the cost
2.vDelays – many clients
attribute this to administrative
incompetence or case overload
3.
Cost
overruns
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Delays
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Poor Quality
Work
Poor quality of work – minimal ROI,
return on their investment
Source: Research: Companies Want Law Firms to Help Them Increase Revenue and Cut
Costs, Law Marketing, July 2, 2009
Challenges continue to intensify
Let’s dive into the 5 challenges law firms
face in providing the value that their
clients want in this difficult and highly
competitive environment
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Challenge #1
Client Retention and Turnover
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Clients were asked:
What are the most undesirable attributes in a law firm?
Failing to control expenses and disbursements
Overworking projects
Poor quality work
Mishandling critically important matters
LACK OF RESPONSIVENESS
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Working harder… not smarter is today’s reality
•
The State Bar of California found that
lawyers “Often find themselves so
overworked that they miss deadlines or fail
to communicate with clients”
•
Due to the recession, the number of cases
lawyers take outside their area of
expertise has heightened
•
These mistakes are fundamental to the
reasons clients are firing their firms . . .
Source: Research: Companies Want Law Firms to Help Them Increase Revenue and Cut
Costs, Law Marketing, July 2, 2009
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What are the results of traditional cost cutting
measures?
•
Poor Quality Work
•
Firms are now at a 4-to-1 ratio
•
The usage of paralegals has steadily
increased over time – they are taking on
more and more “critically important matters”
•
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The lawyer-to-secretary staffing ratio used
to be 1-to-1
Cost cutting has been a major focal point
and now many clients feel that VALUE has
been compromised
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Mishandling Critically
Important matters
Quality control gaps are widening
One reason law firms struggle with retaining clients is because their
management of people, processes and technology has not kept pace
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•
There are too many ways to make mistakes
•
•
There are too many people involved in processes,
increasing risk of mistakes made
•
Law firms are not making the best use of
advances in technology to prevent errors in service
•
…and the amount you’ll pay for these mistakes
(in client loss, potential liability, and risk)
is rising sharply
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Challenge #2
Lack of Competitive Value
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How does cost relate to value?
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In a recent survey, only 1/3 of clients
mentioned cost as an important factor
when considering a law firm
•
This means 2/3 of clients rank other
aspects of service as more important
vthan cost
Source: What Clients Want from Law Firms in 2009, Law Marketing, January 17, 2009
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What are industry experts saying?
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Many law department lawyers and
Chief Law Officers surveyed believe
firms should maintain or increase
profits through innovation and
increasing the value for their services
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Not through regular price increases
and more billable hours
Source: Law2020™ The Future Starts Now, The National Law Review, August 19, 2010,
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Billable hours are always climbing
Billable Hours Increase
2500
•
During the ’60s, attorneys at large firms
billed about 1,500 hours annually
•
Today they average from 2,000 to
2,400 billable hours a year
•
vHowever, client satisfaction has not
increased at the same rate
•
Retaining and attracting clients through
increasing perceived value requires
change
2000
1500
1000
Source: Billable hours enslave lawyers, WORLD Magazine, October 27, 2010,
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What do clients want & what do they value?
•
Today’s clients demand:
Fast response
Accurate results
Transparency and collaboration
•
That’s bad news for law firms because:
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Working faster means increasing mistakes and today’s
clients have zero tolerance
The increased transparency today’s clients demand
means your mistakes are more visible than ever
The bottom line is: Your cost goes up, your billable
hours go down and your risk increases
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Adding value to legal service also includes:
•
•
•
•
•
Improving efficiency
Adapting to the changing needs of clients
Consolidating key functions
Adopting tools to increase responsiveness
Increasing transparency
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So, how are firms dealing with these
changes?
Source: Lawyer Responsiveness: How Small and Mid-Sized Firms Can Stay Competitive in
the Face of High Client Expectations, Blackberry / Research In Motion Limited, 2006
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According to the National Law Review…
•
“law firms have not engaged in
widespread or radical innovation” in
response to the very clear call for
change from their clients
•
Too many are holding tight to the
vantiquated way of doing business
Source: Law2020™ The Future Starts Now, The National Law Review, August 19, 2010
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Challenge #3
Lack of Competitive Value
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Firms are not evolving in this technology age
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Four of the top ten (40%) reasons
law firms lose money are directly
related to lack of technology
innovation
•
Law firms reported in 2009 that:
75% of planned technology
purchases were put on hold
Source: Paperless Archiving and Document Management Solutions, Archive-CD, 2009
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Working harder, not smarter diminishes productivity
A recent study of law firms showed:
•
On average each employee wastes 8
hours per week on paper documents
•
Firms spend:
$20 in labor to file a document
$120 to find a misfiled document
$220 to reproduce a lost document
•
Lawyers spend around 10% of their
time reading information but up to
50% of their time looking for it!
Source: Paperless Archiving and Document Management Solutions, Archive-CD, 2009
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Research also shows…
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Computer-aided review of
documents can save 75% to 90%
of time and labor over similar reviews
done manually
•
Law is an ancient practice seeped in
tradition, but the industry needs to
recognize the importance of
implementing readily available
technology
Source: Computerized E-Discovery Document Review is Accurate and Defensible, Inside Council, January 1, 2011
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Challenge #4
Increased Liability
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Litigation is on the rise
There are 35,000 malpractice suits
against lawyers every year
Administrative errors account for almost
one third of reported claims in the Profile
of Legal Malpractice Claims studies
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Source: ARE YOU AT RISK? The Biggest Malpractice Claim Risks and How to Avoid
Them, Law Practice Magazine, July/ August 2010
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Are clients getting the attention they deserve?
•
Another conflict that leads to malpractice
suits stems from “benign neglect”
•
This neglect is due to the practice of lawyers
taking too many cases and failing to give
each client the VALUE they deserve
•
Reasons for neglect may also include:
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Failing to streamline
Failing to outsource key elements
Slow to adopt technology
Sources: Lawyers Overseeing Lawyers: Can lawyers police themselves? A new look at self-regulation, Insurance Journal, July 3, 2006; “Investigation and Prosecution of Disciplinary
Complaints Against Attorneys in Solo Practice, Small Size Law Firms and Large Size Law Firms”, The State Bar of California, June 2001
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Even if you don’t get sued . . .
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•
The liability for any mistake is growing
and losing a big client can be a death
sentence for your company
•
In a field where accuracy is key and
respect is key, your reputation means
v
more
and more - it’s the capital you
trade on every day
Challenge #5
Not Adapting To the Speed of Business
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The speed of business has changed
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•
You have to do more with less
and do it faster
•
You can’t do it all yourself
anymore!
•
You have more partners and
vendors than ever and your
reputation is in their hands
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Small mistakes can lead to big consequences
•
The number of mistakes partners and
vendors make add to your liability and
increase your costs
•
Losing just a handful of top client could
cost you millions!
•
Nestle dropped a major national firm
when a series of mistakes (including
a misdirected fax) became too much
to overlook
Sources: Clients declare the unforgivable law firm mistakes, Oct 2010 Lawyers Weekly
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Resources are scarce for those you partner with
Robbing Peter to pay Paul:
•
Many state budgets have restricted
innovation of business filing processes
through the following methods:
They now divert a percentage of filing
fees to other departments
Secretary of State’s budgets have been
cut by up to 25% over the last 2 years!
Source: Business Information Modernization (BIM) Proposal Update, California Secretary of State Debra
Bowen, December 1, 2010, http://www.sos.ca.gov/business/pdf/processing-times.pdf
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Too many documents, too little time
•
This dramatically increases the amount of
time it takes to process filed business
documents
•
Today, some Secretary of State offices
process over 1 million Statements of
Information each year – that’s 3,846
documents every DAY!
•
No one can afford delays, not you or
your clients
Source: Business Information Modernization (BIM) Proposal Update, California Secretary of State Debra
Bowen, December 1, 2010, http://www.sos.ca.gov/business/pdf/processing-times.pdf
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Time is valued by clients
•
The entire filing process for an LLC, merger
or acquisition can take 10 to 60 business
days depending on demand and staffing
•
If a single item of the filing is incomplete or
misfiled, the entire process MUST BE
REPEATED, doubling the filing time
•
Long delays can severely hinder business
transactions – especially in complex merger
and acquisition cases
Source: Forming a California LLC: Mistakes to Avoid
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Today’s reality. . .
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•
Declining margins/demanding clients
mean the consequences of poor
business decisions are now more
expensive and more immediate
•
Change, innovation, technology and
outsourcing must be embraced to
provide a competitive advantage in
tomorrow’s world
•
Let’s look at four cost-effective
strategies a law firm can incorporate
that will streamline their business and
improve their bottom line
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Strategy #1
Embrace the Value Challenge
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What is the Value Challenge?
•
VALUE
The Association of Corporate Counsel’s
(ACC) Value Challenge is founded on the
premise that…
v
COST
•
After years of price increases and
minimal innovation and efficiency,
the connection between the value
of legal services and the price has
been severed
The Value Challenge is an effort to
restore balance between value and cost
Source: ™ The Future Starts Now, The National Law Review, August 19, 2010
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What do clients perceive as value?
Law Firms
Clients
Successful
results
More price
competition
Let’s compare what law firms
believe clients want and the
reality
v
Source: Lawyer Responsiveness: How Small and Mid-Sized Firms Can
Stay Competitive in the Face of High Client Expectations, Blackberry/
Research In Motion Limited, 2006; Law Firms in Transition, Altman Weil,
2010
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Initiatives and suggestions of the challenge include…
•
Offering a flat monthly fee or other non-hour
based fee structure for services provided
•
Increasing the scope of functions you provide
so that clients can group contracts together
•
v Request For Proposals on services to
Offering
increase transparency
•
How do you do these things without increasing
your administrative burdens?
Source: Law2020™ The Future Starts Now, The National Law Review, August 19, 2010
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How do you get to the next step?
Incorporate Technology
v
Outsource Time Intensive
Processes
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Strategy #2
Incorporate Technology
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Technology enhances communication
•
Technology is a cost-effective way
to provide real-time updates &
enhance communication between
multiple parties
•
It can increase transparency
throughout all aspects of the
process including:
Showing all possible outcomes
Expected length of time and fees
Enhanced notifications of changes
needed
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Real time communication is VALUED!
“All people (you, your clients, your
outsourcing partners) want to access their
applications and information when, where,
and how they want”
– The National Law Review
•
The highest cause of client anxiety
is not knowing the status of a case
Source: Law2020™- What Will It Take for Law Firms to Thrive?, The National Law Review, December 24, 2010
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Cloud computing can bring everyone together
•
According to an International Legal
Survey, 39% of law firms are either
currently implementing or actively
considering future use of cloud
computing within various facets
of their business
•
hey have found that using this
technology can increase
communication and reduce
administration expenses
•
They also want their outsourcing
partners to have this technology as well
Source: Law2020™- What Will It Take for Law Firms to Thrive? The National Law Review, December 24, 2010
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What is it?
•
•
Cloud computing is locationindependent computing, where shared
servers provide resources, software,
and data to computers and other
devices on demand
It is real time information
and collaboration that’s accessible
anywhere in the world at any time as
long as there is an internet connection
Lawyer
Paralegal
Cloud
Computing
System
Filing
Company
Source: Law2020™- What Will It Take for Law Firms to Thrive?, The National Law Review, December 24, 2010
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Client
Cloud computing provides flexibility and agility
Lawyers want to be mobile: Over 70% of American Bar Association members say they at
times telecommute from a wide variety of locations and use various mobile devices out of
office
Telecommuting Locations
95%
88%
Source: Survey Documents Rise of Telecommuting Lawyers, ABA Journal, July 9, 2010
© CTS Inc. - 2013
89%
79%
Smartphones
Laptops
Computers
12%
Coffee
shops
Or cafes
courthouses
14%
Libraries or
21%
Other’s
offices
Hotels
Home
32%
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Use of Mobile Devices Away from
the Office
Strategy #3
Incorporate Outsourcing
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Clients value deadlines
Source: 2010 Law Department Outsourcing Study, ALM, 2010
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•
So… how do you meet or beat deadlines?
•
Outsource to companies that specialize in
areas of legal administration
•
This frees up human resources so that
personnel can focus on:
•
Core competencies
•
Streamlining processes
•
Responding more effectively to increased
workloads
Consider the following firm’s experience
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•
Phillip J. of Burnham and Associates had
two clients merging their companies to
form a new LLC
•
This was a $12.3 million deal
with a large loan accruing approximately
$3,000 per day in interest while the deal
was waiting to be closed
Consider the following firm’s experience
•
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After due diligence had been completed by
one staff member, Phillip assigned another
to send the documents to a filing company
to process the merger articles with the
Secretary of State (SOS)
Small oversights lead to huge problems
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•
After a three week delay the documents
came back to Philip’s office via courier
•
The documents had been rejected by the
SOS due to a name duplication and a
missing signature on one of the forms
•
The filing company had experienced
continual staff turnover forcing 3 different
employees to handle the transaction
•
. . . hence no one caught the errors before
the documents were sent
The results…
•
Philip had to notify his two clients of the
delay
•
He also billed his clients the cost of
recreating and resubmitting the
documents, along with duplicate payments
of state fees the second time
•
Understandably, the client was livid
Delays were costing him thousands in
interest each day
And the deal remained unfinished
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The solution
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•
Philip instructed the paralegal to fix the
mistakes and send the documents to a
different filing company as soon as
possible
•
Because the new filing company operated
through a cloud computing system, the
paralegal simply uploaded or scanned the
documents into their system
•
This allowed both clients, Philip, all the
paralegals and the filing company to have
immediate, secure access to the
documents
Attention to detail
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•
Philip instructed the paralegal to fix the
mistakes and send the documents to a
different filing company as soon as
possible
•
Because the new filing company operated
through a cloud computing system, the
paralegal simply uploaded or scanned the
documents into their system
•
This allowed both clients, Philip, all the
paralegals and the filing company to have
immediate, secure access to the
documents
Ultimate results
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•
The account manager advised Burnham
and Associates to upgrade to a 24 hour
expedite filing service because she had
checked with the SOS and the filing
turnaround was backed up to 3 weeks
•
The filings were accepted and the merger
completed within the next 2 days
•
Both clients expressed their ultimate
satisfaction in the transaction results due to
the quick turnaround of events after initial
mistakes had been made
The ROI of outsourcing can be substantial
. . . especially when utilizing a cloud
computing system
•
You should hope to expect:
Real time information and filing updates between
all parties involved
Response time can be reduced by 500%
Notification of need for additional documents
is instantaneous
No lost files!
Reduced costs through reduced administration
Higher perceived client VALUE
Source: 2010 Law Department Outsourcing Study, ALM, 2010
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Strategy #4
Choosing the Optimal Outsourcing Partner
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Vetting your vendors
•
Are you as careful when hiring a vendor
as a new associate?
•
Make sure the partner you entrust with
confidential client materials is equipped
to protect those materials
•
Do not assume that all providers are
fully capable
of delivering
Source: Easy mistakes to make when embracing LPO, Outsourcing Beta, 9/10/10
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What should law firms value?
•
In a recent survey, 77% of law firms said
their #1 criteria (VALUE) for choosing a
vendor is customer service
•
What does customer service entail?
Quick responses
Prompt resolutions
Assistance with problems specific to
their area of expertise
•
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Firms become dependent on vendors to
provide accurate and excellent results…
just like their clients!
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Source: Vendor Satisfaction Survey: Help, Please!, Law.com, June 23, 2010
Customer service also includes . . .
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•
Accuracy
•
Uniform, high level of support
•
Speed
•
Innovative technology that
incorporates cloud computing
© CTS Inc. - 2013
State of the art technology systems
64
•
Consider vendors with technology
capabilities that allow secure collaboration
between the vendor, you and your client
•
We know clients want access to all
processes and information . . .
•
Consider how access 24/7/365 to important
documents would increase your work
speed, make your workload easier and give
clients what they want
•
Make sure your vendor is staffed to
accommodate the work you send their way
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Agility matters
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•
In order for you to show innovation,
vendors you partner with need to
demonstrate agility
•
Look for partners who have evolved their
organization of people, process and
systems for optimal responsiveness
•
Expertly trained and dedicated account
managers with years of experience will
adapt their service to fit your needs
•
An organization with tailored service is the
kind of vendor you want to build a long
term relationship with
© CTS Inc. - 2013
Who here has learned something of value today?
We hope you learned that
despite a difficult market
place, there are ways that
firms can decrease their
administrative challenges
and provide more VALUE
to their clients
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This study was sponsored by…
Allow us a few minutes to tell you about our company . . .
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Who we are . . .
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•
Founded in 1979, CTS is a public
document filing and retrieval service
company
•
We are proud of our position as leaders in
the industry and take extra effort in serving
our clients’ needs
Agent Representation
CTS offers professional registered agents
in many states including:
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Arizona
Louisiana
California
Nevada
Washington DC
New York
Delaware
Oregon
Florida
Texas
Technology is key
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•
We use a state of the art cloud
computing system unique to our
company
•
This allows you to share documents
with your clients and in-house
collaborators with a level of
transparency that not only
decreases risk of mistakes but
heightens service in both decreased
time and increased quality
Other benefits we bring…
Cost Effective & Efficient
Highly Skilled Staff
•
•
•
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Partnering with attorneys, banks,
escrow, and CPA firms, we
provide the most cost effective
and most efficient filing and
retrieval service in the industry
We provide the highest quality
service for the price
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Our staff has many years of
experience and is highly trained
Each account manager
averages more than 8.5 years
experience with our company
•
A major portion of our on-going
training program includes
complete instruction on all
Corporate and UCC law changes
Making you look your best
Timely Turnaround
•
At CTS your time is valuable
•
If you need special or urgent attention, let
us know and we will do everything we can
to help you
Outstanding Customer Support
•
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We take great pride in providing the
highest quality service and customer
support in the industry
What our customers are saying…
Thank you Kristy!!!!! My
“stress
level just dropped
have been using CTS for the past
“tenWeyears,
and have found their customer
100%. Thanks to you we
can close. I will definitely
let all parties know that
CTS, you in particular are
one of the reasons we
will be able to close.
service to be outstanding, knowledgeable,
reliable and helpful. We have had a
wonderful experience using their services
from filing documents with the California
Secretary of State and other states
throughout the United States. We would
highly recommend using their services.
“
“
- Larry
- Sherrie M.
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What our customers are saying…
Like an exceptional friend, CTS is always there. CTS has been Berliner
“Cohen’s
“go-to” filing service and resource for over 12 years, and in all that
time they have not failed in providing us with excellent customer service
while going above and beyond. When we have questions or last minute
filings, solutions arrive promptly and professionally. We wouldn’t go
anywhere else.
“
- Berliner C.
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Our gift to you
We would love to be your choice vendor and ensure filing accuracy and top
speed in all your searches and filings.
Trial Package:
6 month free UCC monitoring
in California
10 complimentary California
UCC searches
We’ll invest in you because you’re going to love our service!
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www.caltitlesearch.com
(916) 448-1397 or (800) 482-1497
1005 12th St Ste.E,
Sacramento, CA 95814
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